[Federal Register: December 6, 2002 (Volume 67, Number 235)]
[Notices]
[Page 72713-72714]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06de02-104]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-46930; File No. SR-DTC-2002-08]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of Proposed Rule Change Relating to Unitary Action
Procedures
November 27, 2002.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on June 13, 2002, The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change (File No.
SR-DTC-2002-08) as described in Items I, II, III below, which items
have been prepared primarily by DTC. The Commission is publishing this
notice to solicit comments from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
I. Self Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
DTC proposes to adopt procedures to enable its nominee, Cede & Co.,
to exercise certain rights as the recordholder of securities on deposit
at DTC where Cede & Co. is permitted to act with respect to 100% of the
securities on deposit or not act at all under applicable law. (This is
known as a ``Unitary Action'' situation.) When involved in a situation
that purports to require a Unitary Action under applicable law, DTC
would still attempt to follow the procedures it applies when exercising
rights that do not purport to require a Unitary Action.
II. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, DTC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. DTC has prepared summaries set forth in sections A, B,
and C below of the most significant aspects of such statements.\2\
---------------------------------------------------------------------------
\2\ The Commission has modified the text of the summaries
prepared by DTC.
---------------------------------------------------------------------------
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
Under DTC's current procedures in situations not involving Unitary
Actions for solicitations when an issuer has announced an annual or
special shareholders meeting or consent solicitation and where a record
date has been established, DTC assigns applicable Cede & Co. voting
rights or consenting rights to its participants that have securities
credited to their accounts on the record date and issues an omnibus
proxy and forwards it to the issuer or trustee. DTC also assists its
participants in exercising other rights available to Cede & Co. as the
recordholder of securities on deposit at DTC. Examples of the rights
that participants may exercise through DTC are the right to dissent and
seek an appraisal of stock, the right to inspect a stock ledger, and
the right to accelerate a bond. Participants may seek DTC's assistance
in exercising such rights on their own behalf or on behalf of their
customers. DTC will act in these matters only upon written instructions
from participants with securities credited in their DTC free accounts.
When involved in a situation that purports to require a Unitary
Action under applicable law, DTC would nevertheless attempt to follow
the procedures described in the preceding paragraph. If, for example, a
foreign bankruptcy court stated that it would accept votes for approval
of a plan of bankruptcy from bondholders holding through DTC from Cede
& Co. but only in the form of a 100% yes or no vote or not at all, DTC
would attempt to assign its voting rights to its participants or
otherwise act in accordance with its participants' instructions.
DTC will not be liable for any losses arising from actions it takes
or fails to take in connection with Unitary Actions other than those
losses that are directly caused by DTC's gross negligence or willful
misconduct.
In Unitary Action situations, DTC may incur unusual expenses (e.g.,
hiring outside counsel) that are specifically attributable to the
securities that are subject to the Unitary Action. Under DTC Rule 20,
DTC may charge back to each participant holding a position in Unitary
Action security such participant's pro rata share (based on the number
of shares or the principal
[[Page 72714]]
amount of bonds or notes) of DTC's expenses related to DTC's taking or
not taking an action in connection with a Unitary Action.
DTC believes that the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to DTC because the proposed rule change will clarify the
procedures that DTC will follow in situations calling for Unitary
Actions and thereby promote the prompt and accurate clearance and
settlement of securities transactions.
B. Self-Regulatory Organization's Statement on Burden on Competition
DTC does not believe that the proposed rule change will impose any
burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments from DTC participants have not been solicited or
received on the proposed rule change.\3\
---------------------------------------------------------------------------
\3\ Previously, DTC had filed another proposed rule change to
establish procedures for Unitary Actions. Securities Exchange Act
Release No. 34-45316 (Jan. 18, 2002), 67 FR 4299 (Jan. 29, 2002)
(File No. SR-DTC-2001-05). In response to a comment letter from the
Corporate Actions Division of the Securities Industry Association
(Mar. 25, 2002) and conversations with Board members of that
Division, DTC withdrew that proposed rule change and submitted the
present filing.
---------------------------------------------------------------------------
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within thirty-five days of the date of publication of this notice
in the Federal Register or such longer period (i) as the Commission may
delegate up to ninety days of such date if it finds such longer period
to be appropriate and published its reasons for so finding or (ii) as
to which the self-regulatory organization consents, the Commission
will:
(a) By order approve such proposed rule change or
(b) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing including whether the proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Room, 450 Fifth Street, NW., Washington,
DC. Copies of such filing will also be available for inspection and
copying at DTC's principal office. All submissions should refer to File
No. SR-DTC-2002-08 and should be submitted by December 27, 2002.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\4\
---------------------------------------------------------------------------
\4\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-30889 Filed 12-5-02; 8:45 am]
BILLING CODE 8010-01-P